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Philippines wants WTO to help small firms cut trade costs

The Philippines and 27 other countries are asking the World Trade Organization (WTO) to establish a program that would reduce trade costs and make it easier for more micro, small and medium enterprises (MSMEs) to participate in and benefit from international trade.

The Friends of MSMEs, a 28-nation group that includes the Philippines, has submitted a draft ministerial decision on establishing a work program for MSMEs to the WTO General Council. The draft ministerial decision, a copy of which was obtained by the BusinessMirror, has been circulated among WTO member-countries upon the request of the Friends of MSMEs. The group hopes that it will get the nod of member-countries during the 11th WTO Ministerial Conference (MC11) this December in Buenos Aires, Argentina.

“Costs related to foreign trade operations represent a significant burden for MSMEs interested in participating in international trade,” it read.

Once the draft ministerial decision is adopted by WTO member-countries at MC11, a work program addressing the issues surrounding the participation of MSMEs in global trade shall be established.

Among the issues to be tackled by the program includes the improvement of access to information on trade requirements, regulations and markets for MSMEs. It will also address the ways to promote a more “predictable” regulatory environment for MSMEs.

Measures that contribute to reducing trade costs for MSMEs in areas, such as trade facilitation, shipping and logistics, and procedures and requirements related to origin will be identified.

The draft ministerial decision indicated that access to trade finance for MSMEs, including those through cooperation with other multilateral institutions, will be promoted.

The work program must identify MSMEs’ issues that could be addressed in WTO Trade Policy reports and consider how they could benefit from technical assistance and capacity-building initiatives.

“The discussions under the work program shall favor horizontal and nondiscriminatory solutions, which are likely to yield benefits for the participation of MSMEs in international trade, taking into account the specific needs of developing countries and least-developed countries,” the draft ministerial decision read.

Once the draft ministerial decision is approved, a working group will be established under the general council to conduct discussions on issues that affect MSMEs.

“The working group shall consider the work of other WTO bodies. As appropriate, it may invite these bodies to undertake specific assignments and cooperate with them closely in areas of their competence,” it read.

The general council will review the progress made by the working group and may also supplement the issues earlier set by the decision, according to the draft.

The established working group will prepare its first report for the 12th MC in 2019.

The Friends of MSMEs is comprised of Argentina, Brazil, Brunei Darussalam, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, the European Union, Guatemala, Honduras, Japan and the Republic of Korea.

Malaysia, Mexico, the Republic of Moldova, Nicaragua, Pakistan, Panama, Paraguay, Peru, the Philippines, the Russian Federation, Singapore, Switzerland, Chinese Taipei, Uruguay and Vietnam are also part of the group.

Earlier, the Philippines urged WTO to create a body that would focus on how MSMEs, particularly those in developing countries, can participate in international trade.

The country’s statement was delivered by Trade Undersecretary Ceferino S. Rodolfo Jr. during the informal ministerial meeting in Marrakesh, Morocco, on October 9 and 10. The development of MSMEs is among the priorities of Philippines in the upcoming MC11.

“The Philippines, together with the friends of MSMEs, is seeking appropriate arrangements within the existing framework of the WTO and relevant committees, such as the establishment of a working group under the general council that will be mandated to consider how the multilateral trading system can impact and benefit MSMEs, with particular consideration given to the needs and interests of developing and least-developed countries,” Rodolfo said.

He added the creation of a working group on MSMEs would ensure that discussions on how the international market may affect and benefit the MSMEs around the globe will be sustained. In his speech during a workshop organized by Friends of MSMEs in October 31, WTO Director General Roberto Azevêdo said WTO member-countries have built up “some good momentum” behind the MSME debate as MC11 draws nearer.

Azevêdo noted that MSMEs serve as the backbone of many economies, representing more than 90 percent of all companies worldwide and accounting for 60 percent of employment. “Yet, their participation in world trade does not reflect their importance domestically. In developing countries, for example, exports represent less than 10 percent of MSMEs’ total sales,” he said.

“Clearly, there is scope to do more here. Helping MSMEs to join trade flows in greater numbers will go a long way to making the trading system more inclusive and improving the lives of individuals and communities around the world,” he added.

Azevêdo said among the barriers that hinder the participation of MSMEs in international trade include: lack of appropriate information and skills; difficulties in accessing trade finance; burdensome customs procedures; and high fixed costs. “The smaller the companies, the greater the challenges seem to be,” he said. “If we want to help MSMEs to trade more, we need to understand better what is standing in their way. This is very important.”